S stocks finished the day flat after spending much of it in the doldrums. Financials and Technology underperformed while REITs and telecom outperformed a sign that traders were on the defensive.
The biggest trading action of the day has been in currency and commodity markets where abrupt change in risk tolerance from complacency to concern has occurred. Rising risks related to Syria ahead of Secretary of State Tillerson’s visit to Moscow this week and related to North Korea amid military moves in the area. Traders have been rattled by the reminder that external events can flare up out of nowhere and take over the political agenda without warning. A return of political risk concerns sent capital fleeing out of risk markets and back into defensive havens sparking major breakouts for both gold and the Japanese Yen today.
UK markets also had a positive day as lower than expected headline inflation eased pressure from the Bank of England to raise interest rates. The UK also continued to outperform Europe where political uncertainty around the French election coming up in less than two weeks has been dragging on sentiment. UK markets may remain active Wednesday around the UK employment report.
Crude oil rallied again Tuesday boosted by indications from Russia and Saudi Arabia that they could be open to extending production cuts for another six months. Late in the day, API reported a 1.3 mmbbl drawdown in US oil inventories a sign that the big build phase is over and the market is starting to tighten up again.
S&P/ASX futures have been rising overnight with rising metal and energy prices boosting shares of miners and energy companies. Australia may remain active through the day with commodity market active.
Wednesday also brings a Bank of Canada meeting. The Bank is not expected to make any changes to interest rates. It could, however, leave the door open to a rate cut based on risks from changes to US trade policy even though so far it looks like the new Administration is prepared to work with Canada, while preparing to crack down on other countries.
There have been no major announcements after the US close today
Significant announcements released overnight include:
UK consumer prices 2.3% as expected
UK core CPI 1.8% vs street 1.9%
UK retail prices 3.1% vs street 3.2%
UK producer input prices 17.9% vs street 17.0%
UK producer output prices 3.6% vs street 3.4%
UK house prices 5.8% vs street 6.1%
Eurozone industrial production 1.2% vs street 1.9%
Germany ZEW current situation 80.1 vs street 77.5
Germany ZEW expectations 26.3 vs street 14.8
Upcoming significant economic announcements include:
(Note: 11:30 am in Sydney/Melbourne is currently 1:30 pm in Auckland, 4:30 pm in Vancouver, 7:30 pm in Toronto/Montréal, 12:30 am in London and 8:30 am in Singapore)
9:50 am AEDT Japan producer prices street 1.4% vs previous 1.0%
9:30 am BST UK jobless claims previous (11K)
9:30 am BST UK 3M employment change street 70K vs previous 92K
9:30 am BST UK unemployment rate street 4.7%
9:30 am BST UK average weekly earnings street 2.2%
8:30 am EDT Canada Teranet house prices previous 13.4%
10:00 am EDT Bank of Canada interest rate 0.50% no change expected
10:00 am EDT Bank of Canada monetary policy
11:15 am EDT Bank of Canada Poloz press conference
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